2 min to read
The USDJPY experienced a temporary decline below 140 yen
reflecting waning expectations for a September rate hike.
“In the aftermath of Chairman Powell’s press conference, the USD/JPY experienced a temporary decline below 140 yen, reflecting waning expectations for a September rate hike”
Throughout today’s New York foreign exchange market session, the dollar faced increased selling pressure. As anticipated, the FOMC announced a 0.25% interest rate increase during the afternoon, but they kept the door open for further decisions in the September meeting. Chairman Powell’s subsequent press conference emphasized a data-driven approach towards future rate hikes. While the possibility of a rate increase in September still exists, market sentiment is trending towards a scenario where the rate hike might be postponed. Presently, short-term financial markets estimate the likelihood of a September rate hike at around 20%.
The USD/JPY briefly dipped below 140 yen following the Chairman’s press conference. However, Chairman Powell reiterated his skepticism regarding rate cuts within the year and also mentioned the potential challenge of reaching the 2% target until 2025, both of which have helped stabilize the USD/JPY around the 140 yen level.
The EUR/USD witnessed increased buying interest, briefly touching around 1.1040 dollars during the Tokyo session before recovering and maintaining its position above the 21-day moving average.
There are concerns among some analysts that if the ECB adopts a cautious stance on additional rate hikes during the upcoming meeting, the euro might face sustained pressure. Even some ECB members who have been wary of inflation due to weak growth projections are likely to question the necessity of further rate hikes. In fact, if price pressures at the distribution level subside, there is a possibility that inflation may decline sooner than previously anticipated by the ECB. As a result, this meeting is expected to underscore a decision-making approach anchored in data-dependence.
Additionally, economic indicators in the eurozone fell below expectations this week, briefly driving the EUR/USD below 1.1050. The options market forecasts a 60-pip range for the EUR/USD over the next 24 hours, with some suggestions pointing towards a potential slide towards 1.10 dollars following the FOMC.
Meanwhile, the GBP/USD is experiencing strong buying interest, reclaiming ground towards the 1.29 dollar level and finding support from the 21-day moving average, thus maintaining its upward trajectory.
In light of recent weak economic indicators in the eurozone, expectations for a hawkish ECB have diminished, resulting in uncertainty surrounding rate hikes after September. On the other hand, the Bank of England is approaching the Monetary Policy Committee (MPC) meeting next week. Despite the recent UK Consumer Price Index (CPI) showing a slowdown beyond expectations, which led to reduced expectations for a significant 0.50% rate hike, the belief in continued rate hikes by the Bank of England remains strong. In this context, the pound is perceived to be more favorable than the euro.
Visit XM Official Website.
